New Hybrids Face Slow Sales

NEW YORK (AP) — Last summer was a good time to be in the hybrid business. Gas prices climbed to new records, and Toyota couldn't make its Prius fast enough as drivers turned their heads with envy at the sight of the gas-sipper's eye-catching sloping roofline.

Just a few months later, pump prices have collapsed, and so too have sales of gas-electric vehicles, which have lost ground along the way to cheaper but still fuel-efficient conventional vehicles.

Paying thousands of extra dollars for a hybrid car when gas topped $4 a gallon wasn't unreasonable because with enough driving, it only took a few years to recoup the added cost. But with the economy mired in a recession and fuel prices at their lowest in six years, pinched consumers seem less willing to fork over the extra thousands of dollars for a car that coaxes just a few extra miles out of a gallon of gas.

At this point, buying a hybrid makes as much economic sense as buying a gas-guzzling SUV did last summer.

"The cost-benefit analysis doesn't support the decision to buy one of these higher-priced hybrids today," said Stephen Spivey, senior auto analyst for the consulting firm Frost & Sullivan. "Obviously, if fuel prices go back up, it's going to be more attractive to look at a hybrid."

Automakers are counting on just that. Toyota Motor Corp. on Sunday unveiled its Lexus HS250h hybrid sedan at the North American International Auto Show in Detroit, and the Japanese carmaker plans to introduce a redesigned 2010 Prius on Monday. The Japanese automaker has said gas-electric hybrids are its long-term core powertrain strategy, and by early in the next decade it will launch as many as 10 new hybrid models.

Meanwhile, Honda Motor Co. unveiled its new Insight hybrid, which will go on sale in April and compete head-on with the Prius. The car will be priced lower than the slightly larger, $23,650 Civic hybrid, a sign that Honda is targeting penny-pinching consumers.

"Hybrid is important if it's affordable and it carries the right image," said John Mendel, Honda's U.S. executive vice president. Hybrids have an image of having a high cost to get their technology, he said, but with the Insight, "we'll try to change that paradigm a little bit and say this is hybrid for the masses."

Ford Motor Co. unveiled a hybrid version of the Ford Fusion in November that can go up to 47 mph on batter power alone, and General Motors Corp. has turned out a number of hybrid versions of its vehicles recently, like the Chevrolet Malibu and the Saturn Vue.

But the cost of regular gasoline has fallen 56 percent from its all-time summer high, averaging $1.79 on Sunday, according to auto club AAA, the Oil Price Information Service and Wright Express.

Hybrid sales plunged 43 percent in December and 50 percent in November, according to the auto Web site Edmunds.com, surpassing the industry's overall sales decline of 36 percent in December and 37 percent the month before.

Toyota watched sales of the Prius, the top-selling hybrid in the U.S., tumble 45 percent in December, while sales of Nissan Motor Co.'s Altima hybrid fell a whopping 70 percent.

It's hard to blame buyers when the 2009 Altima hybrid costs about $5,900 more than the standard version. The Altima hybrid improves combined city-highway fuel economy to 34 miles per gallon from 26 mpg in the standard four-cylinder. Even with gas at $4.11, where the national average peaked in July, a driver has to log nearly 159,000 miles to recoup the upfront cost. For someone who drives 15,000 miles annually, the gas savings is $558 a year. That's more than 10½ years of driving — assuming the car lasts that long.

With gas at current prices, get ready for a 364,000 mile road trip to get your money back.

And that premium doesn't factor in the interest most buyers will pay to finance the car, nor does it account for the opportunity cost. Invest that money instead, and, at a 7 percent rate of return, it doubles in less than 10½ years.

To be sure, hybrid premiums vary. The Toyota Prius runs about $3,800 more than a comparable Camry. On the other hand, a Mazda Tribute SUV hybrid costs $8,000 more than the conventional model.

Moreover, while the Prius gets a lot of attention because its 48 miles per gallon in city driving leads all cars rated by the Environmental Protection Agency, many drivers have found that their actual results vary. For those who spend most of their driving time on the highway, the advantage provided by a hybrid is slight.

In the case of the Altima, the hybrid has a 12 mpg advantage in stop-and-go city driving, but it's only a 2 mpg difference on the highway versus the gas-only version, according to the EPA. Driving 15,000 miles a year with a commute that keeps you on the freeway, you'd have to drive the car until 2057 to save enough gas to make the hybrid cost-effective, even at the summer's record gas prices.

In highway driving, the difference between the conventional four-cylinder Malibu and its hybrid counterpart is also negligible. Same goes for the Tahoe, the Saturn Aura and many other models.

All of this doesn't necessarily mean drivers aren't worried about fuel economy. Instead, they seem to be drawn to smaller, more fuel-efficient conventional car rather than jumping on the hybrid bandwagon.

According to figures from Ward's AutoInfoBank and Autodata Corp., sales of non-hybrids with government-rated efficiency above 30 mpg — cars like the Chevrolet Cobalt, the Honda Fit and the Hyundai Accent — actually rose about 2 percent in 2008 from 2007, while U.S. auto sales fell 18 percent overall.

Meanwhile, more and more cars are stretching the limits of fuel economy without the complications of a hybrid vehicle's batteries. The nonhybrid 2010 Ford Fusion, for example, gets a combined 29 miles per gallon, surpassing the Accord and Camry.

"If the purpose is to save fuel, then I think obviously you're looking at these Hyundais and these Hondas and the Cobalt, etc., that give great fuel mileage" and cost less than hybrids, Spivey said.

Bringing down the hybrid premium could make the cars more financially attractive, analysts said. Jennifer Watts, spokeswoman for the Washington D.C.-based Electric Drive Transportation Association, said that could be accomplished by offering more tax credits to hybrid buyers and, in the longer term, developing a better domestic supply base for hybrid batteries, many of which are imported and expensive.

Luke Tonachel, transportation analyst for the Natural Resources Defense Council, said tighter fuel-economy standards would help make hybrids more appealing and promote technological investment.

"Consumers know that low gas prices are not here to stay for the long term," he said. "The demand is going to continue to be strong for more efficient vehicles."

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